If Santa offered to leave just one exchange traded fund (ETF) under the tree this Christmas, I wouldn't ask for the hottest momentum play.
I would want something built to last. Something that is designed to quietly compound through booms, busts, bubbles, and bear markets. That ETF would be the VanEck Morningstar Wide Moat ETF (ASX: MOAT).
Image source: Getty Images
What is the MOAT ETF?
The idea behind the VanEck Morningstar Wide Moat ETF is refreshingly simple, and it borrows heavily from the same philosophy Warren Buffett has used for decades.
Rather than chasing whatever is popular, the ETF focuses on stocks with wide economic moats. These are sustainable competitive advantages that make it hard for rivals to steal market share or erode profits.
These advantages can take many forms. They might be powerful brands, high switching costs, network effects, cost leadership, or regulatory barriers. What matters is that they allow a business to earn strong returns for long periods, even when the economic backdrop is challenging.
What stocks does MOAT own?
The VanEck Morningstar Wide Moat ETF's portfolio is made up of US-listed stocks that are deemed to have sustainable competitive advantages and are trading at reasonable valuations.
Its holdings change periodically, but today it includes businesses such as Applied Materials (NASDAQ: AMAT), Thermo Fisher Scientific (NYSE: TMO), Merck & Co. (NYSE: MRK), Amgen (NASDAQ: AMGN), United Parcel Service (NYSE: UPS), Salesforce (NYSE: CRM), Nike (NYSE: NKE), and Adobe (NASDAQ: ADBE).
This mix is important. While technology is well represented, the fund is not a tech-only ETF. Healthcare, industrials, financials, and consumer brands all play a role. This diversification helps reduce the risk of relying on a single sector to drive returns.
Adobe is a good example of the type of company the VanEck Morningstar Wide Moat ETF targets. Its creative and document software is deeply embedded in workflows around the world. Customers don't switch away easily, pricing power is strong, and recurring revenues are highly predictable. That is exactly the kind of competitive edge the ETF is designed to capture.
Strong performance
Much like Warren Buffett has achieved with his similar investment philosophy, the VanEck Morningstar Wide Moat ETF has been a market beater over the past decade.
During this time, the ETF has delivered total returns of more than 15% per annum, comfortably exceeding historical share market average returns.
Why this would be my Christmas pick
If Santa brought me the VanEck Morningstar Wide Moat ETF this Christmas, I wouldn't unwrap it and start trading. I would tuck it away, reinvest distributions, and let time do the work.
It certainly isn't flashy, but it doesn't need to be. An ETF built around competitive advantages and sensible valuations is the kind of gift that keeps paying off long after the Christmas decorations come down.
